Breaking the Criminal’s Bank

Breaking the Criminal’s Bank

By Dialogo
January 01, 2010

Estates, houses, apartments, vehicles and businesses were among the assets belonging to the late Gonzalo Rodríguez Gacha, aka “The Mexican,” one of the most powerful drug traffickers from the Medellín cartel. Today, his estate belongs to the Colombian government after being seized under extinction of dominion.
Colombian law defines the extinction of dominion over assets as the loss of rights to an asset, which is handed over to the state through a legal process with complete disregard to the owner. It is applied when assets are acquired directly or indirectly from criminal activity. The law was created in 1996 and modified in 2002. “It is an absolutely necessary instrument; it provides the ability to seize assets from drug trafficking and the mafia,” said Luis Camilo Osorio Isaza, Colombia’s ambassador to Mexico, during the Interactive Seminar on Information Technology in Mexico in March 2009.
According to Colombia’s Office of the Attorney General in April 2004, 118 of the 270 assets seized from Rodríguez and his immediate family fell under extinction of dominion. In addition to 114 properties and public transportation vehicles, stock in the Club Los Millonarios (Millionaires Club) soccer team, airplanes, livestock and company investments were also seized. In August 2009, Caracol Radio reported that 116 of Rodríguez’s assets — which changed ownership on several occasions — were seized under extinction of dominion. The assets are managed throughout the legal process, and once the legal proceedings are done and the assets forfeited, they are then sold. The money is channeled through the Fund for Rehabilitation, Social Investment and Fight Against Organized Crime, which finances social-interest housing for those displaced by violence. It is also invested in equipment and technical enhancement for the fight against drugs and the construction of maximum security prisons. Between 1991 and mid-2009, the National Narcotics Directorate, or DNE — an organization that managed seizures, among other things — received 72,000 assets, 10 percent of which fell under extinction of dominion.

A large portion of these assets comes from drug traffickers, which, according to Colombian President Álvaro Uribe, is a reason this law has impeded territorial takeovers.
Criminals are not the only people affected by this law. Some people have been impacted by it after acquiring property that had been obtained illegally in the past. For example Farmacoop, formerly Kressford Laboratories, a manufacturer of pharmaceuticals, was sold to its employees in 1998. But that business used to operate as a front for the drug trafficking brothers Miguel and Gilberto Rodríguez Orejuela and therefore, in 2004, it was seized under the extinction of dominion law and placed under the supervision of the DNE.
Extinction of dominion has not been a flawless process. The DNE was accused of corruption in its management of certain seizures, and the case is under investigation. As a result of the accusation, the DNE was forced to undergo a restructuring process. The seized assets are now managed by a new company called Special Assets Society, under the supervision of the Ministry of Finance and Public Credit. Its board of directors will consist of business people with vast experience in the private sector.
The seized inventory includes all kinds of hard-to-sell mafia extravagances — luxury cars, commercial planes, recreational property, zoos, designer shoes, Santería dolls — which has made asset management more complex. According to Semana magazine, one of the assets that’s been under the state’s possession for the longest time is a house belonging to “The Mexican” valued at more than $6.5 million. The house, located in an exclusive spot north of Bogotá, was looted by criminals searching for hidden money. The city’s land-use planning office, which dictates urban regulations, now only allows for an embassy to operate in that location.
The Law Crosses Borders

The Colombian extinction of dominion law has become a legislative model for other governments. Flavio Mirella, a representative of the U.N. Office on Drugs and Crime for Peru and Ecuador, believes the extinction of dominion law is a legal instrument being enforced successfully in several countries to combat asset laundering and to finance anti-drug trafficking initiatives. “You have to hit the drug traffickers where it hurts most: their pockets,” Mirella said to Peru’s Inforegion news agency.
Mexico City adopted its own version of the Colombian extinction of dominion law on March 9, 2009. The legal proceedings are what set them apart. In Mexico, it is a civil action brought before a specialized judge, while in Colombia, it is brought before the country’s attorney general and a criminal judge.
“Due to the [previous] lack of an extinction of dominion law, it has been possible for drug traffickers or kidnappers to recover a good portion of the assets obtained by the police and the public, federal and state ministries,” Andrés Lozano, secretary of the public safety commission of the Mexican Chamber of Deputies, told Buzos magazine.
One month after Mexico City’s law took effect, the first extinction of dominion lawsuit surfaced: Mexico City’s Hotel Madrid was seized by authorities based on allegations it had been used for human trafficking, according to Mexico’s Radio Trece news.
On Aug. 28, the extinction of dominion law went into effect for the entire country.

Some people believe this new legislation can be detrimental to citizens’ rights, specifically regarding property. “As with other measures taken under the pressures of the fight against drug trafficking, authorities could abuse this law to seize the assets of undesirable persons, even if they aren’t criminals,” Ramiro Bautista, a legal expert at the National Autonomous University in Mexico, told Buzos. The law could also become clouded if asset management is not handled with transparency.
Peru also followed in the footsteps of the Colombian legislation. Its version is known as the loss of dominion law, which took effect in March 2008. Peru had 45,000 cases of dominion loss, according to the attorney general’s anti-drug office.
Before this law existed, seized assets were passed along to charities, but various government sectors demanded the auctioning of the properties instead. The law stipulates a period of 90 days in which to auction the seized assets once they are declared dominion of the state. This income is assigned as follows: 45 percent goes to construction of prisons, 25 percent to the implementation of the new Code of Criminal Procedure, 15 percent to administration and the remaining 15 percent as a fund in case the assets must be returned. Some sectors, however, have already requested changes to the legislation. Rómulo Pizarro, director of the National Commission for Development and Life Without Drugs, asked that crimes such as corruption and environmental offenses be included. In addition, he asked that a portion of that income be designated toward the fight against drugs.
Seeking Regulations

Other Latin American countries are seeking legislation allowing them access to illicit assets. Ecuadoran legislators are analyzing an extinction of dominion bill. “We are all aware that Ecuador needs a law to fight corruption with regard to assets and ill-gotten fortunes and that we ought to commit more citizens to this fight,” said Fernando Cordero, president of the Legislative and Fiscal Commission, to the national newspaper El Comercio.
Ratifying this law is important, according to Domingo Paredes, executive secretary of the National Council on the Control of Narcotic Drugs and Psychotropic Substances, an entity that looks after the assets seized from drug trafficking. Otherwise, the country could remain a “paradise for illicit investments” for asset laundering, Paredes said to daily national newspaper El Telégrafo.
In Honduras, the courts must wait to sentence a defendant before the state can make use of the assets. It is a limiting factor in attacking these criminal organizations head on. For this reason, the public prosecutor’s Office on Organized Crime in Honduras presented a privation or loss of asset dominion bill, which is under review in the National Congress, according to El Heraldo newspaper. If the law is approved, the criminal trial and a ruling to determine the loss of the assets will be carried out simultaneously.
Guatemala’s extinction of dominion bill would be one of the fiscal reform strategies aiming to combat the tax decline in the country. President Álvaro Colom is one of the supporters, due to the economic advantages the regulation would present for the country. Only the Judicial Branch presently has access to confiscated narcotrafficking assets.
Mariano Rayo, one of the representatives supporting the bill, told Guatemalan newspaper Prensa Libre that the law is vital. “For a successful strategy to combat drugs, it is necessary to intercept the trafficking and growing of drugs and … to remove the incentive, the money and the assets from organized crime.”